Unemployment rate is slowly reaching its pre-Covid level, but labor force is coming down

India’s unemployment rate stood at 6.9% in February 2021. This is lower than the 7.8% seen in February 2020. It is estimated that the unemployment rate is reaching its pre-Covid level. Although the Center of Monitoring Indian Economy (CMIE) in its Weekly Analysis on Thursday reported that the unemployment rate reached its pre-lockdown level, the Labor Force’s participation rate and employment rate were far below the level before the lockdown.

Employment demand declined

Data from CMIE shows that the Labor Participation Rate in February 2021 was 40.5%, which is lower than the 40.6% recorded in January 2021 and at 42.6% in February 2020. This means that there has been a decline in employment demand.

The employment rate fell to 37.7% in February 2021

The employment rate in India declined to 37.7% in February 2021, compared to 39.4% in 2019-20. The employment rate has continued to decline in the last three years. However, this rate has recovered from earlier declines in FY 2020-21. According to CMIE, the return of the unemployment rate to the pre-lockdown level is not celebratory as it is showing more shrinking labor force than a decline in the number of unemployed.

Estimates of 1 crore fewer jobs this year than last year

CMIE further stated that the number of jobbers has fallen sharply during this period. During July-February of the last financial year, an average of 40.53 crore people were employed. In comparison, 39.52 crore people were employed during the same period of the current year. There is an estimated 1 crore fewer jobs this year than last year. The post-lockdown period thus indicates a 2.5% drop in employment and a 6.2% drop in the number of unemployed. This results in a 2.8% contraction in labor force.